GSA contractor pays $60 million to settle roofing fraud probe

Aug. 28, 2013 - 06:00AM
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An Ohio-based company has agreed to pay more than $60 million to settle a federal probe into inflated prices for roofing materials and services on government contracts under a settlement deal unsealed this week in U.S. District Court in Washington.

RPM International Inc., a publicly traded company based in Ohio, said the settlement resolves an investigation into the company’s work on General Services Administration multiple award schedule roofing contracts.

“Though our roofing division made mistakes in the administration of our GSA contracts, it has always delivered excellent roofing and weatherproofing solutions to its federal customers,” RPM Chairman and Chief Executive Frank Sullivan said in a statement.

The case stemmed from a previously undisclosed whistleblower complaint filed by former Tremco Inc. executive Gregory Rudolph, who reported the fraud to the GSA’s Office of Inspector General in February 2010. Tremco is a RPM subsidiary.

“GSA [Inspector General] auditors and investigators worked diligently to make sure the taxpayers got the benefit of required price reductions, and received a fair price for the products and services purchased with taxpayer funds,” GSA IG Brian Miller said in a Justice Department announcement Wednesday.

The Justice Department said claims settled by the agreement were allegations, and “there has been no determination of liability.”

Filed under seal in 2010, Ruldolph’s complaint said the company for years was marketing expensive materials to the government without disclosing lower-cost identical materials. Although government customers were supposed to get the best prices, that didn’t happen, according to the complaint.

“Tremco’s pricing structure, or lack thereof, resulted in Tremco routinely providing discounts to private customers without notifying the government of these lower prices ...” the complaint stated.

The lawsuit also quoted a Tremco executive as once saying that the company’s compliance officer’s job was to keep him out of jail.

The company also sold defective roofing products directly and indirectly, while partnering with certain subcontractors to inflate costs and lock out competition, according to the complaint.

In a statement, Sullivan, the RPM CEO, said the majority of the incidents on which the settlement is based happened from 2002 to 2008.

“We are fully committed to conducting business with the highest levels of compliance, and have taken a number of proactive actions to strengthen our administrative procedures and compliance systems to prevent future errors from occurring,” he said.

Under the False Claims Act, whistleblowers share in the proceeds of money recovered by the government. Rudolph is slated to received about $10.9 million as his share of the recovery in the case.